Labor costs in warehouse production

I´m curious and like to be up to date in my business area. I read a lot about logistics. Recently I looked at several trend analysis reports about warehouse logistics. Most of the subjects was the same in these reports. You know e-commerce omni-channel, automation, robotics, tablets and so on. However, one subject got my attention more than the others did. It was “Cut” labor costs. Some of these reports was from USA and the reason for the focus on labor costs is probably increasing minimum wages in the US. However, all reports including them from other countries mentioned “cut” labor costs.

My question is, how could it be a trend to “cut” labor costs? Is it not every manager’s responsibility all the time to keep all of the costs on a low level using continuous improvement and hunting time thieves? It is a natural part of every business, it is cost reduction in order to be competitive. If senior management said to you, you have to get rid of one third of your staff and after that you still could manage to have a functional warehouse then you have made a very bad job as a manager. You have failed to be agile and adapting resources to the needs.

What I want to say is, in every change or improvement you do in your supply chain you have focus on time and resources (including labor costs). “Cut” labor costs is not a subject in itself, it is a product of all the improvements and innovations you and your team do in order to minimize the use of resources. Hopefully the sales department do a great job and increase the turnover and you don´t need to fire employees. If you deliberately have more staff than needed because it is convenient, you are the wrong person at the job and you jeopardize the whole future of the business in your company.

“Cut” labor costs is not a trend. Every company with self-preservation is constantly trying to reduce all types of costs. It is part of a “tool” most people know by now called lean. The goal is to minimize the waste of resources including labor costs. The main resource you should focus on is time. To reduce labor costs you optimize processes and operations in the internal flow to save time. Time is one of the most expensive resources in the warehouse. To keep or increase value of the goods in the supply chain flow you need to minimize the time you spend on every operation and transport.

1 Comment

Be careful of your lean and efficiency strategies. Cutting staff is always a place to start. However, with no staff,management either do the work or better yet, have no one to manage. Consequently, being fired themselves. Poetic justice!